Overview of

Development Economics
 Economics and Development Studies
• Economic Development is a special field of economics which
concentrates on the study of countries which are in the process
of moving upward from low levels of income, and social
progress.
• The study of economic development allows us to understand a
wide variety of issues in developing countries such as
widespread poverty and economic inequality despite significant
economic progress.
• Our own region – East Asia - experienced dynamic economic
growth and development which began in Japan, spreading to
South Korea, Singapore, Taiwan, and Hong Kong (then referred to
as newly industrialized economics (NIEs).
• The industrialization experiences of these Asian “tigers” formed
the basis of the “East Asian Development Model”
• Countries such as Indonesia, Malaysia, Thailand, and the
Philippines were inspired by Japan and the NIEs, and they
developed strategies that promoted the inflow of foreign capital
and encouraged exports.
Three Core Values of Development:
• Sustenance: The ability to meet basic needs
• The basic goods and services, such as food, clothing, and
shelter, that are necessary to sustain an average human being
at the bare minimum of living.
• Self-esteem: To be a person
• The feeling of worthiness that a society enjoys when its
social, political, and economic systems and institutions
promote human values such as respect, dignity, integrity, and
self-determination.
• Freedom from servitude: To be able to choose
• A situation in which a society has at its disposal a variety of
alternatives from which to satisfy its wants and individuals
enjoy real choices according to their preferences.
 Three objectives of development
• To increase the availability and widen the
distribution of life-sustaining goods.
• To raise the levels of living.
• To expand the range of economic and social
choices.
 The 1997 Asian Financial Crisis
• Triggered by the collapse of the Thai baht in July 2, 1997.
• The Philippine peso was devalued on July 11, 1997 and the IMF
announced it will make more than a billion dollars available to
the Philippines to help relieve pressure on the peso.
• The Singapore dollar declined in July 24, 1997 and the
Indonesian Rupiah plunges in August 14, 1997.
• The Hong Kong stock exchange plunges in October 23, 1997 and
the South Korean won begins to weaken and the SK won hit new
lows in December 18, 1997.
• The Dow Jones Industrial Average plunges as it became affected
by Asia’s currency crisis in October 27, 1997.
• Asia’s once vibrant economies were plunged into deep recession.
• There was an unprecedented reappraisal of policies ranging from
corporate government to exchange rate management.
• There was a rethink of the prescriptive policies imposed on the
ailing economies by the IMF and the World Bank.
 The Recovery in 1999
• South Korea year-on-year industrial production and GDP
increased dramatically
• The stock market values doubled in Thailand and Malaysia
• The primary equity indexes in Seoul and Singapore returned
to their pre-crisis levels
• However, when the US economy slowed in 2001 and 2002,
and other events such as war in Iraq and spread of SARS
virus in 2003, the region’s prospects were adversely affected
and the future became uncertain.
 Development Economics versus other
Aspects of Economics
• Development Economics focuses on economies with low
per capital incomes.
• It considers the experience of industrial countries as
relevant for analyzing the process of economic growth.
• Uses tools and methods such as growth theory,
macroeconomics, microeconomics, labor, industrial
organization, international trade, and fiscal and monetary
policies and apply them to the problems and challenges of
developing countries.
Economic Growth vs. Economic Development
• Economic growth is a sustained increase in production, however,
economic development is broader and has a much more
encompassing view than economic growth.
• Economic development = economic growth + an improvement in
the people’s quality of life.
• Economic development results from economic growth and
relates to levels of social and humanitarian achievement and
distribution and a narrower measure of per-capital income.
• Living standards can be measured using GDP or GNP growth
rates, however these two alone are not sufficiently balanced to
adequately capture the essence of economic development.
• Human development indicators include per-capita income, life
expectancy, infant mortality, average level of educational
attainment.
 GDP for Selected South and East Asian Economies (2014-2018)
(in current USD)

Country Name 2014 2015 2016 2017 2018

China 10,438,529,153,237.60 11,015,542,352,468.90 11,137,945,669,350.60 12,143,491,448,186.10 13,608,151,864,637.90
Japan 4,850,413,536,037.80 4,389,475,622,589.00 4,926,667,087,367.50 4,859,950,558,539.00 4,971,323,079,771.90
India 2,039,127,446,298.60 2,103,587,813,812.80 2,290,432,075,123.80 2,652,242,857,923.90 2,718,732,231,257.60
Korea, Rep. 1,411,333,926,201.20 1,382,764,027,113.80 1,414,804,158,515.30 1,530,750,923,148.70 1,619,423,701,169.60
Indonesia 890,814,755,233.20 860,854,235,065.10 931,877,364,177.70 1,015,423,455,783.30 1,042,173,300,625.60
Thailand 407,339,361,695.60 401,295,970,240.30 412,352,789,519.60 455,275,517,239.30 504,992,757,705.00
Singapore 314,851,156,183.40 308,004,146,057.60 318,068,476,293.90 338,406,474,038.70 364,156,657,769.90
Malaysia 338,061,963,396.40 301,354,756,113.20 301,255,454,041.40 318,958,236,443.10 358,581,943,446.30
Philippines 284,584,522,898.90 292,774,099,013.70 304,897,590,205.40 313,619,747,740.20 330,910,343,611.00
Vietnam 186,204,652,922.30 193,241,108,709.50 205,276,172,134.90 223,779,865,815.20 245,213,686,369.20
Myanmar 65,446,199,787.80 59,687,410,896.60 63,256,184,700.20 66,719,084,253.50 71,214,803,377.80
Cambodia 16,702,610,842.40 18,049,954,289.40 20,159,271,965.00 22,180,376,505.70 24,542,474,061.20
Lao PDR 13,268,458,231.90 14,390,442,307.40 15,805,692,545.90 16,853,087,485.40 17,953,786,416.10
Brunei Darussalam 17,098,342,541.40 12,930,394,937.80 11,400,854,267.70 12,128,104,859.10 13,567,351,175.00

Data from database: World Development Indicators

Last updated: December 20, 2019
 GDP per capita (current USD) – Philippines

Data from database: World Development Indicators

Last updated: December 20, 2019
 GDP per capita for Selected Asian Economies (2011-2018)
in current USD

2011 2012 2013 2014 2015 2016 2017 2018

Singapore 53,890.40 55,546.50 56,967.40 57,562.50 55,646.60 56,724.20 60,297.80 64,581.90
Japan 48,168.00 48,603.50 40,454.40 38,109.40 34,524.50 38,794.30 38,332.00 39,290.00
Brunei Darussalam 47,055.80 47,741.90 44,740.10 41,726.80 31,164.60 27,157.80 28,572.10 31,628.30
Korea, Rep. 24,079.80 24,358.80 25,890.00 27,811.40 27,105.10 27,608.20 29,742.80 31,362.80
Malaysia 10,399.40 10,817.40 10,970.10 11,319.10 9,955.20 9,817.70 10,254.20 11,373.20
China 5,618.10 6,316.90 7,050.60 7,651.40 8,033.40 8,078.80 8,759.00 9,770.80
Thailand 5,492.10 5,860.60 6,168.30 5,951.90 5,840.00 5,978.60 6,578.20 7,273.60
Indonesia 3,643.00 3,694.30 3,623.90 3,491.60 3,331.70 3,562.80 3,836.90 3,893.60
Philippines 2,345.30 2,572.60 2,749.40 2,831.30 2,867.20 2,941.20 2,981.90 3,102.70
Vietnam 1,525.10 1,735.10 1,886.70 2,030.30 2,085.10 2,192.20 2,365.60 2,566.60
Lao PDR 1,378.40 1,581.40 1,825.70 1,998.30 2,134.70 2,308.80 2,423.80 2,542.50
India 1,458.10 1,443.90 1,449.60 1,573.90 1,605.60 1,729.30 1,981.30 2,010.00
Cambodia 882.3 950.9 1,013.40 1,093.50 1,162.90 1,278.60 1,385.50 1,510.30
Myanmar 1,176.20 1,165.80 1,162.30 1,251.80 1,133.00 1,192.50 1,249.80 1,326.00

Data from database: World Development Indicators

Last updated: December 20, 2019
 New Approaches to Measuring Economic Development
• Human Development Index (HDI)
• This index varies between one to zero and is composed of three components:
• Per capital income
• Life expectancy at birth
• Level of educational attainment (adult literacy and educational enrolment rates)
• As of 2018, Norway has the highest HDI at 0.954 and Niger has the lowest HDI at
0.377. The HDI of the Philippines is 0.712 and is ranked #106 out of 189 countries
being studied
• Healthy Life Expectancy
• A measure by WHO which summarizes the expected number of years to be lived in
“full health”.
• The years of ill health are weighted according to severity and subtracted from the
overall life expectancy rate to give the equivalent years of healthy life.
• As of 2016, Singapore has the longest healthy life expectancy at 76.2 years and
Central African Republic has the shortest healthy life expectancy at 44.9 years for
both sexes.
• Green GNP
• The informal name given to national income measures that are adjusted to include
the depletion of natural resources (both renewable and non-renewable) and
environmental degradation
• Adjustments (deductions to standard GNP) would include (1) damages to the global
environment (global warming, ozone layer depletion), (2) Defensive expenditures
(environmental production and compensation for environmental damage, medical
expenses)
 Human Development Index (HDI)
Human
Life expectancy Expected years Mean years of Gross national income GNI per capita rank
development HDI rank
at birth of schooling schooling (GNI) per capita minus HDI rank
index (HDI)
HDI rank Country (index value) (years) (years) (years) (2011 PPP $)
2018 2018 2018 2018 2018 2018 2017
VERY HIGH HUMAN DEVELOPMENT
9 Singapore 0.935 83.5 16.3 11.5 83,793 -6 9
19 Japan 0.915 84.5 15.2 12.8 40,799 6 19
22 Korea (Republic of) 0.906 82.8 16.4 12.2 36,757 8 22
43 Brunei Darussalam 0.845 75.7 14.4 9.1 76,389 -39 43
61 Malaysia 0.804 76.0 13.5 10.2 27,227 -15 61
HIGH HUMAN DEVELOPMENT
77 Thailand 0.765 76.9 14.7 7.7 16,129 -6 77
85 China 0.758 76.7 13.9 7.9 16,127 -13 86
106 Philippines 0.712 71.1 12.7 9.4 9,540 -1 106
111 Indonesia 0.707 71.5 12.9 8.0 11,256 -14 111
MEDIUM HUMAN DEVELOPMENT
118 Viet Nam 0.693 75.3 12.7 8.2 6,220 10 118
129 India 0.647 69.4 12.3 6.5 6,829 -5 129
140 Lao PDR 0.604 67.6 11.1 5.2 6,317 -13 140
145 Myanmar 0.584 66.9 10.3 5.0 5,764 -13 146
146 Cambodia 0.581 69.6 11.3 4.8 3,597 2 145

Data from database: United Nations Development Program (UNDP)

 Healthy Life Expectancy
Both sexes Male Female
2016 2015 2010 2005 2000 2016 2015 2010 2005 2000 2016 2015 2010 2005 2000
Singapore 76.2 75.9 74.8 73.3 71.3 74.7 74.4 73.0 71.7 69.7 77.6 77.4 76.6 74.9 72.9
Japan 74.8 74.7 73.8 73.2 72.5 72.6 72.4 71.4 70.6 69.9 76.9 76.8 76.2 75.7 75.0
Republic of Korea 73.0 72.7 71.4 69.9 68.1 70.7 70.3 68.8 67.2 65.2 75.1 74.8 73.7 72.2 70.8
China 68.7 68.4 67.6 66.7 64.8 68.0 67.8 67.0 66.1 64.1 69.3 69.1 68.3 67.3 65.6
Brunei Darussalam 67.9 67.7 67.9 67.6 65.9 67.0 66.8 67.0 66.5 64.9 68.8 68.5 68.9 68.7 67.0
Viet Nam 67.5 67.3 66.5 65.7 64.3 64.2 64.0 63.2 62.3 61.0 70.7 70.5 69.9 69.1 67.6
Thailand 66.8 66.6 65.5 63.8 62.2 64.0 63.7 62.9 61.4 59.4 69.8 69.5 68.1 66.4 65.1
Malaysia 66.6 66.4 65.6 64.8 64.2 65.3 65.0 64.1 63.3 62.8 68.1 67.9 67.3 66.6 65.8
Indonesia 61.7 61.5 60.4 59.7 58.7 60.4 60.3 59.1 58.5 57.7 63.0 62.8 61.8 60.9 59.7
Philippines 61.7 61.6 60.6 59.6 59.2 59.4 59.2 58.3 57.2 56.9 64.2 64.0 63.2 62.2 61.7
Cambodia 60.8 60.4 58.5 54.5 50.0 59.4 59.0 57.0 52.7 48.3 62.1 61.6 59.8 56.2 51.6
India 59.3 58.9 57.4 55.3 53.5 58.7 58.4 57.2 55.3 53.6 59.9 59.5 57.6 55.2 53.4
Myanmar 58.4 58.1 56.3 54.9 53.4 56.9 56.5 54.7 53.4 52.0 59.9 59.6 57.8 56.4 54.8
Lao PDR 57.9 57.5 56.0 53.4 50.7 56.9 56.6 55.1 52.6 49.8 58.8 58.4 56.8 54.2 51.5

Data from database: World Health Organization (WHO)

 Standard vs. Green GNP

Source: Economic Development, Dowling

 Making Comparisons between countries
• Exchange Rate Method
• Uses the exchange rate between the local currency and the USD to convert the
currency into its USD equivalent. A country’s GDP and GDP per capital would
then be valued in USD.
• Purchasing Power Parity Method
• Develops a cost index for comparable baskets of consumption goods in the
local currency and then compare this with prices in the US for the same set
of commodities.
• PPP is defined as the number of units of the country’s currency required to
buy the same amount of goods and services that a dollar would buy in the
US.

• PPP Method vs. Exchange Rate Method?

• PPP Method considers the relative prices of all goods produced (both traded
and non-traded goods), whereas exchange rate method only considers the
relative prices of traded goods.
• PPP method is unaffected by exchange rate changes while exchange rate
method is affected by exchange rate changes.
• It is easier to determine exchange rates but costly to compute income using
PPP method since price movements need to be updated regularly
GNI per capita, PPP, exchange rate, 2018

Data from database: World Development Indicators

Last updated: December 20, 2019
The Future of the Millennium
Development Goals
Millennium Development Goals and Targets for 2015
 Sustainable Development Goals

Source: United Nations Development Program (UNDP)